Public Bill Committee

[Dr William McCrea in the Chair]

Clause 4

Amendment proposed (this day): 12, in clause4,page2, line20,at end insert— ‘The Office shall also examine and report on the impact of Treasury policy on the duties of the Secretary of State under section 2 of the Child Poverty Act 2010.’.—(Chris Leslie.)

Question again proposed, That the amendment be made.

William McCrea: I remind the Committee that with this we are discussing the following:
Amendment 13, in clause4,page2,line20,at end insert—
‘The Office shall also examine and report on the impartiality of the local government finance settlement as it is applied across local authorities in England.’.
Amendment 8, in clause4,page2,line20,at end insert—
Amendment 9, in clause4,page2,line27,leave out ‘one occasion’ and insert ‘two occasions’.
Amendment 10, in clause4,page2,line30,at end insert—
‘over the next five years.’.
Amendment 11, in clause4,page2,line37,at end add—

Graeme Morrice: May I add to the plaudits that we heard this morning with regards to your benevolent chairmanship, Dr McCrea?
I want to comment on amendments 12 and 13, tabled by my hon. Friends the Members for Bristol East and for Nottingham East. Amendment 12 places a duty on the Office for Budget Responsibility to examine and report on the impact of Treasury policy on the duties of the Secretary of State under section 2 of the Child Poverty Act 2010. I wholly concur with my hon. Friend the Member for Nottingham East, who moved the amendment. He said that if we are serious about making a difference in society then there can be no better cause than the eradication of child poverty. To do that we must ensure that the targets and ultimate goal in the 2010 Act are met. As my hon. Friend the Member for Bristol East reminded us earlier, the current Government have yet to publish a national child poverty strategy, so there is nothing in place at the moment to ensure that the requirements of the Act are implemented. What would be better than a duty placed on the OBR to ensure that that happens?
As my hon. Friend the Member for Nottingham East so eloquently stated, it is important that we move away from the mindset of structures, processes and inputs that sometimes become the dominant force in much of what we do towards a culture of outcomes and putting people first. I say that in a non-partisan fashion as we can all be guilty of that, regardless of party politics. The important thing is to recognise it so that we make the changes to bring about the difference. On the basis of my positive outlook and reasoned argument, I am sure that the Minister will now discard her shackles, denounce her fetish and accept the amendments as tabled—or perhaps not.
Seriously, child poverty is a scandal. I recently met John Dickie, the head of the Child Poverty Action Group in Scotland. I was shocked to learn that despite the country’s undoubted wealth, a staggering one in four of our children live in poverty. The latest official statistics suggest that recent progress in reducing child poverty has stalled. I fear that with the Government’s deficit reduction measures, that situation will only get worse.
I have little doubt that we all agree with the objective of eliminating child poverty by 2020. That is vital to the well-being of the country and a true mark of a decent and civilised society. Why not give that objective the credibility that it deserves and place it firmly within the remit of the OBR?
Amendment 13 places a duty on the OBR to examine and report on the impartiality of the local government finance settlement in England. This is an important amendment due to the highly partisan nature of this issue, regardless, to be fair, of which Government are in power. With the abolition in England of the Audit Commission, which is a great mistake by this Government, there is now a significant gap in the independent, authoritative and impartial assessment of local government finance in England. That contrasts sharply with the situation in Scotland in which the Accounts Commission is highly regarded by both local and national Government and works well. With the abolition of the Audit Commission in England, it makes sense to place a duty on the OBR to conduct an impartial assessment of the English local government grant settlement, thereby greatly reducing the partisan rhetoric on this issue by all parties.
Finally, although it is not mentioned in the Bill as far as I can see, will the Minister address the proposed relationship between the OBR, which is a UK body, and the devolved Administrations, particularly the Scottish Parliament with its fiscal powers and those proposed by the Scotland Bill?

Thomas Docherty: I apologise for not being here for the very end of this morning’s debate—the hon. Member for South West Norfolk and I attended a Westminster Hall debate. I regret missing the chance to serve under your stewardship for that half hour, Dr McCrea, and it also appears that I missed a fascinating debate about fetishes. I look forward to receiving the record, so that I can see how the issue was discussed.
I shall speak briefly to amendment 13, which centres on local authorities. I shall stay away from the issue of Scottish Ministers, because I fear that if I addressed that debate for too long, you would rule me out of order, Dr McCrea. I shall keep my thoughts on that until we get to the clause stand part debate.
The local authorities of England spend billions of pounds each year, despite the best efforts of the Secretary of State for Communities and Local Government to slash their budgets by 56%. Unlike many colleagues in this room, I have never had the privilege or honour of serving as a member of a local authority—some colleagues present have acted as leaders of councils and conveners. I would not, however, wish to be a councillor in the coming financial year, because incredibly difficult and painful decisions have to be made. I am sorry to dissent from the remarks of my hon. Friend the Member for Livingston, but the level of pain will be much worse under this Government than it would have been under a Labour Government, because of the Secretary of State’s heartless and callous decision to make brutal cuts to the funding of local authorities.

Graeme Morrice: I totally concur with that comment.

Thomas Docherty: I am grateful for that clarification.

Anne-Marie Morris: I am absolutely fascinated by everything that the hon. Gentleman has to say, but I am concerned about its relevance. If the OBR took on all the duties suggested by the Opposition, it would not be focused and I am not convinced that it would do the job that we want it to focus on. I would appreciate the hon. Gentleman’s comments on that.

Thomas Docherty: I am grateful for that intervention, and I might address the issue in a moment.
It is interesting that the well-known hard-left newspaper, The Times, which is owned by the Marxist revolutionary, Rupert Murdoch, made it clear a few weeks ago, just before Christmas, that the 10 local authorities in England that suffered the most brutal cuts were all Labour-controlled councils in the midlands or the north of England, while the councils that had the best settlement—indeed, one or two received a rise in their funding settlement—were all under Liberal and Conservative control in the south of England.

Alec Shelbrooke: The problem with the hon. Gentleman’s statements is that they are based on a snippet of time. It may well be true that Labour councils have had larger cuts inflicted on them than Liberal and Tory councils, but if we look back over history, we will see that those councils were starved of money. Certainly, my own council—Leeds city council—had by far the lowest settlement of any of the metropolitan councils when it was under a Tory-Liberal administration. Neighbouring administrations as close as Wakefield and, of course, Manchester had almost double the settlement per head of Leeds.

Thomas Docherty: I am grateful to the hon. Gentleman, but I am concerned that he seems to be suggesting that the Secretary of State has sought an element of retribution against those councils.

Alec Shelbrooke: I take issue with the word “retribution.” That is not the word; the word is “rebalancing.”

Thomas Docherty: The Secretary of State has many words for it. There is a fascinating debate to be had about funding settlements for local authorities over the past 30 or 40 years. I believe that it would be within the bounds of the debate to say that we had exactly the same problems in the 1980s, when urban, northern councils were starved of funding. The motivation behind some of those decisions in the 1980s was political, on the part of the Secretaries of State for the Environment, as they were known at the time—before a fancy new title came along. In the 1990s and the early part of the past decade, under a Labour Government, a rebalancing of the deficit that those local authorities had suffered from was absolutely right. I can assure the hon. Gentleman that retribution and revenge were not behind the actions of Mr Prescott—now Lord Prescott—and others on the funding settlement, which is not the case with the Secretary of State for Communities and Local Government.
Moving on to the issue raised by the hon. Member for Newton Abbot—the role of the OBR—I was lucky enough to go on an exchange programme organised by the British-American Parliamentary Group in September last year. Its work will be familiar, and many Government Members will have the opportunity to go to the United States on that useful exchange programme, which is funded by the State Department and the Foreign Office. I was there with the hon. Member for Bristol West who, unfortunately, does not seem to have been able to join us yet in Committee.
We had an opportunity to meet with the US Congress and to get a better understanding of the role of the Congressional Budget Office and the other scrutiny mechanisms. They have quite a wide remit, in terms of what they look at in the States, both in the federal set-up and at the state level. It is correct, as my hon. Friends the Members for Nottingham East and for Bristol East have said and tried to achieve in their amendments, to widen the scope of the OBR’s remit somewhat, but not dramatically. It is probably fair to say that the local authorities in England spend more collectively than almost any other Department, except perhaps for the national health service and the Ministry of Defence—I seek clarification from the Minister if I have got that wrong.

Anne-Marie Morris: I hear what the hon. Gentleman says but, because something works in the US, it will not necessarily work here. I am not sure how child poverty, important as it is, and local government can be picked out as the two prime examples. Taking his argument to its logical conclusion, we should be taking on a number of other things, but we then get to the point where we are dealing not only with the Treasury but with a number of other Departments and the situation becomes completely unmanageable.

Thomas Docherty: I am grateful to the hon. Lady who, with her probing questions, is clearly giving some thought to how she will be voting.
Such scrutiny is absolutely right for local authorities, given what a huge part of the Budget they take from the central Government. Local authorities can also raise their own revenue. One of the key aspects of the OBR is looking at the financial stability of public institutions, and I can think of no better example of a public institution with revenue-raising abilities but an uncertain financial future than the local authorities. Also useful, as the carefully worded amendment 13 makes clear, is the fact that such scrutiny would take some of the rhetoric and debate out of the issue.

Justine Greening: The hon. Gentleman is absolutely right that local authorities should be scrutinised in that way—presumably by the OBR. Does he want the OBR to have a scrutiny role and then to pass some kind of judgment? How does he square that with the need for the OBR to be totally independent?

Thomas Docherty: I am not sure why we cannot have scrutiny and independence at the same time. Perhaps I have misunderstood the Minister’s question, but surely the point is for the OBR to provide Parliament with independent analysis of the financial footing of local authorities.
Something I learned from my visit to the US is that individual states are basically going bankrupt, because they are spending more money than they are bringing in from their various revenue streams, whether from federal funding or what they raise through taxation. There is a strong suspicion—I stick purely to England for the purposes of the amendment—that many local authorities are in grave danger of going bankrupt in the next 12 to 24 months. We see local authority after local authority having to make painful decisions. Even the smallest local authorities and Conservative councils are having to lay off huge numbers of staff. It is right to have an independent body to scrutinise fiscal policies at local authority level and determine, first, whether they are able to deliver services, and secondly, whether their projections for expenditure match those for income. I struggle to understand why the Minister does not think a body can be independent and take that scrutiny role. If she could clarify what she meant I would be happy to take another intervention.

Justine Greening: The bottom line is that the amendment the hon. Gentleman is proposing does not talk about that. It talks about a role for the OBR in determining whether the local government finance settlement is impartial. He may have a point, but it is not related to the amendment he is apparently supporting.

Thomas Docherty: I am a huge admirer of the Minister, but I draw her attention to page 2 of the explanatory notes, which I assume she had some part in preparing. It says:
“Clause 4 describes the functions of the Office. Its main duty will be to examine and report on the sustainability of the public finances.”
I therefore struggle to understand why asking the OBR to do a report into the sustainability of local authorities’ public finances does not fall within that scope. That is on page 2 of the document she has in front of her.

Justine Greening: The hon. Gentleman makes an interesting comment, but that is not what his amendment says. [ Interruption. ] I can see him taking advice from his Front-Bench team and I am happy to listen.

Christopher Leslie: The Minister’s comments are illuminating, as she is obviously melting to the persuasive argument my hon. Friend is making. Perhaps he can encourage her to table a more refined, finessed amendment if she feels that just talking about the impartiality of the settlement is insufficient. Perhaps it should be widened to include the sustainability of local public finances as well. Surely that would be the best way forward.

Thomas Docherty: I am grateful to my hon. Friend. What confused me, Dr McCrea, was that earlier this morning, prior to the fascinating debate about fetishes, we had a clear indication from the Minister that she felt that one could be over-prescriptive in an amendment. Perhaps in my youthful naivety I had assumed it was a given that, as part of the work on local authorities, financial sustainability would be looked at. I am deeply sorry if that is not the case.

Alec Shelbrooke: If the hon. Gentleman will indulge me, I would like to intervene and then come back again. First, does he feel that the Audit Commission kept local government finances in check and working as efficiently as they should have?

Thomas Docherty: According to my first-hand experience of Scotland, it certainly did. Do I think that it perhaps lost its way somewhat? Of course I do. Do I think that simply scrapping it will help the public finances? Of course it will not. I very much hope that the Secretary of State, even at this late stage, will reconsider his decision to abolish the Audit Commission.

Alec Shelbrooke: The hon. Gentleman is being most generous in giving way and I am grateful for that answer. We could look at the settlement that has just happened in the Leeds metropolitan council. The Audit Commission identified a huge amount of money being wasted in the purchasing of stationery and so on, simply because council employees purchased it willy-nilly from a catalogue. If it had been added to the bulk order, a 70% discount would have been available. The amendment refers to
“the impartiality of the local government…settlement”.
A truly independent OBR would look at the settlement being given and the structures in place and probably agree that the settlement was reasonable. The recent amendment to the Leeds budget to save 10% on the stationery budget to keep the leisure centres open was voted down, but I am sure that the OBR, with its full independence, would consider that reasonable and might imply that the Government were not impartial in the local government settlements.

Thomas Docherty: I am grateful to the hon. Gentleman for that. I have been slightly confused. I have always believed that some Members on the Government Benches—there are no Liberal Democrat Members here—are quite consistent, and I am surprised he does not support his party’s document published in February 2009. I thought that that would be the basis for the Government’s thinking, particularly with no Liberal Democrat Members around—perhaps they have forgotten that they have a job to do today. That document says:
“The Audit Commission will be given a specific duty to report on whether the basis for allocation is”—
wait for it—
“transparent and in accordance with objective criteria set out by Ministers.”
I appreciate that compromises have been made, and Labour Members want to help our Conservative colleagues. Given that the Audit Commission is being scrapped, we want to provide the next best thing—the OBR and the specific promise that the hon. Member for Elmet and Rothwell gave to his constituents to have transparent and independent auditing of the funding settlement.
The Minister made an excellent point about the wording, and I am sure that if she introduces such an amendment later during the Committee or, if that is not practicable, on Report, my hon. Friend the Member for Nottingham East could be charmed into withdrawing his amendment.

Sheila Gilmore: I should like to speak to amendment 8 and briefly to amendment 12. It is important to examine sustainability as broadly as possible, without being so broad that it is outwith the realms of what the Office for Budgetary Responsibility will do. If we concentrate narrowly on deficit and financial issues, other issues are, in my view at least, ignored. Much has been made at various times—we have touched on this briefly—about the intergenerational issue and intergenerational fairness.
A frequent argument for reducing the deficit as fast as possible is intergenerational fairness, but there are other aspects of such fairness. One is whether more intergenerational unfairness will arise if people do not have jobs and there is no economic growth. We know that long-term unemployment, particularly youth unemployment, has a marked effect on people’s entire future life, and an impact on such things as social inequality. All parties seem to believe that that is an important issue, and have sometimes spoken about it passionately. We must look seriously at how to achieve such fairness. Just using the words is not enough. My argument on sustainability is that we must look seriously at a range of issues. Amendment 8 would clarify sustainability, and provide a definition that would allow us to take into account a range of matters, including economic growth and employment.
Amendment 12 involves part of the whole issue of intergenerational fairness. If we are serious about tackling social inequality, as well as family poverty and particularly child poverty, which is one aspect of that, we must ensure that we measure and take account of whether we are achieving what we say we are achieving. Much criticism has been levelled, particularly at the previous Government, for measuring too much and having too many targets, but if we do not measure, how will we ever know whether we have achieved what we want to achieve? There may be better ways—obviously, the Minister may be able to suggest some—to measure and assess the obligations under the Child Poverty Act 2010 than by giving the task to the OBR, but, at the moment, it seems that there is a gap and that that will not be looked at in as much detail as it should.
We are setting set up a body which I hope will be truly independent, which can look both forward and back at some of the decisions that are made, and which can give a projection of the likely effects of some of the steps that are taken. I would argue that it needs a slightly wider framework.

Justine Greening: We have had interesting debates before and after lunch. I shall briefly run through the amendments in turn to address the issues that have been raised, but I would say to Opposition Members that they cannot have it all ways. We are about to come on to clause 5, which deals with the key principles on which the OBR will run—basically, they are objectivity, transparency and impartiality—which I believe we would all agree are critical. However, the amendments are starting to prescribe what the OBR should do, in spite of the desire to which the hon. Member for Edinburgh East just referred for it to be completely independent. It cannot be completely independent if it is being told what to do in the kind of detail contained in amendments 12 and 13. I shall come to them in a little more detail in a second.
On amendment 8, which is about sustainability, it is right, as the hon. Lady just said, that sustainability is a broad concept that has a multitude of different dimensions. That was debated in the other place. I want to reassure members of the Committee that the Government intend to amend the charter to require the OBR to set out how it will approach sustainability in each of its reports. Hopefully, we can maintain the OBR’s independence but encourage it to be clear about sustainability and how it considers it.

Christopher Leslie: I am interested to hear that the draft charter for budget responsibility is likely to be amended to broaden the sustainability concept. Will the Minister state clearly that if the OBR wishes to study the impact of Treasury policies on, for example, child poverty, she will have absolutely no qualms about that but will in fact welcome it?

Justine Greening: I welcome the hon. Gentleman’s intervention, which shows clearly that although the previous Government did not think of setting up an office for budget responsibility, now that the idea is in a Bill, the Opposition have all kinds of ideas about how its remit could be expanded and developed.
At this point, we want to ensure that the core issues of objectivity, impartiality and transparency are bedded down. The hon. Gentleman has some ideas about what the OBR should find important to look at, but we believe that it should be completely independent. It should be able to look at what it wants to look at. I agree that it should scrutinise Government policy only—it is not there to look at different scenarios. Its expertise is in fiscal forecasting. At this stage, it does not have expertise in distributional analysis, for example, so he is getting slightly ahead of what it is doing at present. What is critical is that it is entirely independent and able to do the analysis it wants to do.
Page 11 of the charter sets out the OBR’s remit, which can be modified over time. We have debated the process by which that would happen—a resolution must be agreed by the House to change the charter. The key point is that the OBR has to be entirely independent, and be seen to be so. That point was made clearly by the Treasury Committee. As we will go on to discuss shortly, it is one of the reasons why we have been so careful to develop a good process for choosing the chair of the OBR. We have been careful to ensure that that person goes through a process of pre-appointment scrutiny and is approved by the Treasury Committee.

Thomas Docherty: I was in this very room less than a month ago during the Armed Forces Public Bill Committee’s discussion of the military covenant. The Minister’s colleague, the right hon. Member for South Leicestershire (Mr Robathan), who is the Minister with responsibility for veterans’ affairs, specifically cited three examples for inclusion in the covenant report. He made it absolutely clear that a report could be fully independent even if Parliament laid down some examples. So I am puzzled. Why has one wing of Government said that the Government can lay down specific examples without ruling out other things? This Minister seems to be suggesting that the Government cannot do that.

Justine Greening: I am talking in the context of the Office for Budget Responsibility, which we are addressing in the Bill. Clearly, the purpose of the OBR is to take a process—the forecasting of public finances and the sustainability of public finances—that used to be delivered by the Treasury and to put it in an entirely independent body separate from the Treasury.
We always had a problem with the figures’ lack of credibility. We would get to each Budget and the figures would be presented in the Red Book, but there would be no consensus on whether they were robust. The Bill sets up an Office for Budget Responsibility, which means that that forecasting is done by an entirely independent group of people. Of course, it needs to work with the Treasury—it is trying to assess the impact of Treasury policies contained in a Budget—but the point is that it is doing that independently. That is why I do not think it is right for us already to be telling the OBR that it needs to do explicit, additional work.
We have addressed the issue of sustainability in the charter. Members have raised their concerns. Many of them have talked about the importance of those issues in the context of the economic environment. Things change, of course, and had we introduced the Bill at a different time, someone would have said that we had to make absolutely sure that it covered some other area that was particularly important at that time.
We are trying to ensure that the House does not get into the business of being explicit about the things that the OBR should be looking at. We want to make it very clear that the OBR should be looking at broad forecasting and responding to particular queries from the Government for independent analysis. The OBR should be in charge of producing Government forecasts in the way that the Treasury did in the past.

Christopher Leslie: I think I understand the logic behind the Minister’s keenness to resist the expansion of the duties listed in clause 4. However, as my hon. Friend the Member for Dunfermline and West Fife has already said, adding a duty to test the impact of Treasury policy on child poverty would not in any way jeopardise the OBR’s independence.
Is the Minister saying that it would be more appropriate to look at the charter’s objectives and the mandate for those specific elements of sustainability? After all, the objective mentions intergenerational fairness and the effectiveness of monetary policy. To the degree that the charter is specific, is she suggesting that it would be more appropriate to amend the charter to include, for example, the duty to test the child poverty impact?

Justine Greening: The answer to that is no.

Thomas Docherty: For my benefit, will the Minister clarify that point? I think she is saying that she is somewhat reluctant explicitly to give additional powers. Suppose that the wording of the amendment tabled by my hon. Friend the Member for Nottingham East stated that the office “may also examine” child poverty or local authorities, rather than “shall also examine”. Would the Minister be content that that was a suitable form of words that made it clear that the option was there while also guaranteeing the independence for the body to make its own decision?

Justine Greening: There is no need to make that change. The Bill enables the Office for Budget Responsibility to fulfil its duties entirely in the way it sees fit. We will soon come to clause 9 on the right to information, under which it can request the information that it thinks it needs.
I will return to my original comments, although I am conscious that I must make progress and respond to the points raised by other amendments. We must allow the OBR to have its independence, and the Bill sets out the context and the duties that it will have. The key to success—the critical point—is that it will have the independence to get on and do its job as it sees fit. The Treasury Committee, quite rightly, flags up the issue of independence as key. If we get to the position where the OBR is not seen as independent, that will fundamentally undermine its ability to deliver what we want, which is credible forecasting that people agree is robust.

Thomas Docherty: Going back to the point raised by the hon. Member for Elmet and Rothwell, my concern—which I suspect is shared by my hon. Friends the Members for Nottingham East and for Bristol East—is that if we do not indicate in some sort of formal manner that the OBR may choose to examine these or other issues, a future Government who are more callous than the Minister may cut the funding off at the knees. The Secretary of State for Communities and Local Government did that to the Audit Commission because he does not like its policies. If we do not write down that the OBR has the power to look at child poverty, local authorities or other areas, is there not a danger that a future Government might claim that it has overstepped its remit?

Justine Greening: I go back to my original comments. It is clear in the Bill and the charter that the OBR can fulfil its duty in the way that it sees fit. I would be concerned if, at some point in the very, very distant future—we hope—the hon. Gentleman’s Government were ever to change and challenge that. That is why we decided that it is important to have parliamentary scrutiny to ensure that any modification of the charter goes through a resolution and is approved by the House of Commons.
I do not accept what the hon. Gentleman is saying. The Bill makes it clear that the OBR is independent and needs to be impartial, and that it has to remain objective at all times. We have set it up to enable it to do that. However, I think that we will come to some additional amendments that may undermine that.

Kerry McCarthy: I am slightly confused, as is my hon. Friend the Member for Nottingham East, about why giving the OBR the task of looking at whether the child poverty target has been met would in any way compromise its impartiality. Does the Minister suggest that it would get embroiled in making political decisions about the child poverty targets? Surely it is a simple matter. We have the Child Poverty Act 2010 and there are four different tests set out in that. That is clear and requires empirical analysis as to whether the target has been met. I do not understand why that would compromise impartiality or integrity.

Justine Greening: I am sorry that the hon. Lady and her colleagues are confused. We do not want to accept the amendment because the role of the OBR is to
“examine and report on the sustainability of the public finances.”
That is its key duty, so its analysis has to be pursuant to that principal duty. The hon. Lady wants to broaden its remit into an area for which it does not have the expertise.
My other point is a fundamental point of principle. Including amendments 12 and 13, which pick up specific policy areas, and saying that the Office for Budget Responsibility must look at them, is by definition starting to compromise its independence in carrying out its job pursuant to what we are setting out in the Bill. I know that the Opposition do not agree with that.
As with many good ideas from Conservative and Conservative-led Governments, I worry that the Opposition will seek to tamper and interfere—in their eyes, try to make better—and undermine what is a very strong idea to set up an independent Office for Budget Responsibility to provide independent forecasts. For too long, this country had a Government who did not produce independent forecasts and did not therefore have a credible fiscal policy, but were able to try to mask the fact that they were taking our economy from being prosperous to being fundamentally weakened with a structural deficit. We now have to spend time addressing that deficit with some very difficult choices.
I was interested to hear the debate on child poverty and local government finance. We know that one of the determinants of child poverty is whether families have jobs, and I merely note that Opposition Members left government with unemployment higher than when they came in.
I also note that their former Chief Secretary to the Treasury left a message for his successor that said that there was no money left. That is a very difficult thing for Opposition Members to keep hearing, but the reality is, even if the shadow Chancellor denies that Britain was left in a financial mess, it actually was. There is no getting away from that.
If Opposition Members are to be taken seriously on the economy, they need to start to outline their alternative. Their refusenik approach to policy so far has been evidenced today in their bleeding-hearts response to what is going on in Government policy. Well, Government policy is in direct response to the utter mess in which the Opposition left our public finances.
My other observation is that if the Opposition want to be credible, they will at least have the guts to admit what they were planning to do, which was to start cutting public expenditure in April. In fact, they were going to cut it by about £2 billion less. If they want to be taken seriously, perhaps at some point during the next three weeks they will set out where their cuts would be made. At the moment, we have not had a penny from them.

Christopher Leslie: You’re in government.

Justine Greening: Is it any wonder? What the British people recognise is that we had a plan for tackling the deficit, whereas the party that created it does not even admit that it existed. [ Interruption. ]

William McCrea: Order. I remind all hon. Members that I am not in government, so you should not say “you’re” anything. I am the Chair. I have the privilege of being totally independent.

Justine Greening: Having set out why I think that the Office for Budget Responsibility needs to stick to its core task, for which we have set it up—

Kerry McCarthy: rose—

Justine Greening: I shall not take any more interventions at present; I have taken an awful lot, as I think the Opposition will recognise.
Let us briefly discuss amendment 9, which would require the OBR to produce sustainability and accuracy reports twice each year. There are good reasons for keeping both reports on an annual basis. On the accuracy report, sufficient new out-turn data must be available to merit a new assessment of forecast accuracy, and a second report in a year would benefit from very little new data with which to analyse accuracy.
The sustainability report will have the broad scope that we have said it needs. The OBR has set out the range of issues that it intends to consider, including changes to the uprating of pension benefits and to the public sector work force. Such changes will require substantial work, which will take time.
An annual reporting requirement provides the OBR with the necessary time to produce the analysis, whereas with a biannual report there would be a risk of its not having sufficient time for such rigorous analysis. Because we want the OBR to be independent, however, there is nothing to stop it producing additional analysis on a more frequent basis, should it wish to.
Again, amendment 10 goes in the wrong direction, because it would require the OBR’s sustainability report to focus only on the next five years. The OBR has said that it intends the report to include long-term analysis on the sustainability of the public finances, which will include projections over the next 40 years to allow a full analysis of long-term trends. That is consistent with the sustainability analysis produced by other international forecasting councils. We do not want to accept an amendment that, far from allowing that, would prescriptively curtail it.
Amendment 11 would give the OBR an explicit role in informing public debate, but the OBR has been designed to produce a broad range of reports that are accessible to everyone. It is required to act transparently to ensure that all its work, assumptions and methodology are set out. We in this House have already spent a lot of time debating OBR reports. I note that the Opposition have become fond of cherry-picking various statistics from such reports, so they are clearly ones that people will use and scrutinise.
A careful balance must be struck between the OBR’s publishing and disseminating the most credible analysis possible, and its having an advocacy role that might result in its being brought into political debates. The last thing we want to do is risk its impartiality and hence its credibility. The OBR will be a force for good only if it is deemed credible, and the Treasury Committee agrees:
“The OBR’s contribution to public understanding should not be confused with self promotion. This commentary function should be one of informing public debate through disseminating better understanding of fiscal policy and long-term economic trends, identifying possible risks in the structure of the economy and provision of data.”
The spirit of the amendment is already achieved through the OBR remit. Through producing the best possible fiscal analysis, and doing so in a transparent manner, the OBR will promote a wider public understanding of sustainability issues.
On amendments 12 and 13, the OBR has been explicitly established to examine a report on the sustainability of the public finances, but, subject to that statutory duty, it is afforded complete discretion in doing so. To ensure that it is credible, it must operate objectively, transparently and impartially. Both amendments seek to give the OBR responsibility. Amendment 12 proposes doing so in measuring child poverty, which would significantly and inappropriately expand its role.
The OBR has an expertise in macro-economic and fiscal analysis, not in examining the distributional effects of Government policy. That would require a significant expansion of the OBR’s capability, which would not be consistent with its responsibilities regarding the sustainability of the public finances. The amendment would bring the OBR into a different analytical territory from the one that it is designed to consider.
Amendment 13 would give the OBR a role in assessing local authority finance settlements. I wish to remind members of the Committee that the OBR is not a policy-making organisation. Policy does—and, indeed, should—remain the domain of the Government. Our decisions regarding the local government finance settlement are the domain of the Government and elected Ministers. The impartiality or otherwise of such decisions is inevitably a subjective and potentially political judgment. Given that we all look at its inquiry with real interest, the Treasury Committee said:
“The OBR should avoid being drawn into seeking to apply political pressure through its commentary—even thought many commentators”—
I am looking at Opposition Members—
“will encourage it to do so. The OBR, is not and should not be, running fiscal policy.”
I agree with that. It would be inappropriate for the OBR to police the Government’s decisions or determine the “impartiality” of those decisions or otherwise. That is more properly a role for Parliament.

Christopher Leslie: The hon. Lady says that she does not think that the OBR has a role in policing the Government’s decisions, yet they are asking the OBR to analyse and assess the sustainability of public finances. Will she now turn specifically to the point that I asked her to address in respect of the “Control Shift: Returning Power to Local Communities” document? Obviously, the Prime Minister’s face is in the foreword to the document in which the Conservative party committed only two years ago to have an Audit Commission. There is no longer an Audit Commission, but the OBR seems the best alternative to be
“given a specific duty to report on whether the basis for allocation”—
of local government finance—
is transparent”
in accordance with objective criteria set out. If the Government now no longer stand by that commitment, that is fair enough, but I would like to hear it from the Minister. Where does she stand on that particular promise, which was made before the election?

Justine Greening: As the hon. Gentleman knows, the local government finance settlement was debated in Parliament on 9 February. That is the appropriate vehicle for Parliament to decide on matters. As for the way in which local government funding is allocated and the debate that he is interested in having on whether that happens on an impartial basis, many Members of Parliament would have their own opinion on whether the settlement their council gets is fair and whether the Government are treating their council impartially.
The hon. Gentleman will be pleased to hear that the local government resource review will be a fundamental look at the future of local government finance. I am sure that he will want to have his say, and stakeholders will have the opportunity over the next few months to put their views on funding for local authorities from 2013 to 2014. There will be a forum and a vehicle whereby impartiality can be considered.
Just down the corridor, the Localism Bill is being discussed in Committee, too. Those on the Government Benches have always been keen on localism and giving local communities more control over what happens to them. I hope that down the corridor the hon. Gentleman’s party is finally embracing the need to move away from central diktat to more locally driven decision making.
With that, I have covered the issues raised by the Opposition Members. I do not accept their amendments. Perhaps some were well intentioned, but they would take the OBR down a route that risks the fundamentals of what it will be set up to achieve: impartiality, objectivity, transparency and making sure that people see it as absolutely independent.

Christopher Leslie: Dear, dear. The sound that you can hear, Dr McCrea, is barrels being scraped as arguments against the amendments are accrued as much as possible. All credit to the officials that the hon. Lady has with her today. It must have taken the phalanx hours of hard work to come up with the argument that we cannot assess the impact of Treasury policy on child poverty because that would jeopardise the independence of the Office for Budget Responsibility.
The hon. Member for Putney is a talented Minister who will go a long way in the years ahead, but that argument was not her finest hour. Perhaps she read on in her notes and got to the point where it said that the issue was outside the remit of the OBR and she tried to avoid saying it. But she did say it eventually.
The reason why she was logically trying to avoid saying that child poverty would be outside the remit of the OBR was that it implies, at a certain level—I am sure this is not true—that she does not regard child poverty as part of responsible budgeting and responsible public financial stewardship.
It is a great pity if the hon. Lady takes that view. For all the points she makes that the OBR does not have the expertise to look at these issues, I am not sure that that is necessarily the case. It is a pretty broad-minded and well skilled organisation. As I said before, if we are to start looking at this concept of responsibility we have to start thinking about outcomes; otherwise we are merely bean-counting and measuring inputs. I had thought that her Administration were against that sort of approach in public policy management, but perhaps I am wrong.
It would be perfectly reasonable to set out in the Bill that the OBR should have this responsibility. That would in no way jeopardise its impartiality or independence. The fact that the Minister eventually had to resort to the arguments that it would risk the fundamentals of the OBR to do so and would be inappropriate for the OBR to have this duty is testament to the lower order priority the Government are showing when it comes to addressing child poverty issues.

Kerry McCarthy: Does my hon. Friend share my suspicion that the real reason why the Government do not want this provision to be included in the Bill is that, given their track record on the Budget and the spending review and the impact of that on children and families, they have no intention of meeting the child poverty targets and they want to brush under the carpet the fact that this Child Poverty Act and these targets are in existence? Obviously if we had this provision in the Bill it would force them to do something about child poverty.

Christopher Leslie: Indeed. Something like a year from the commencement of the Child Poverty Act, which is around 25 March, a report must be produced on progress towards meeting the child poverty targets. Our suspicion is that the Government may well trigger the provisions in the Bill that provide that fiscal circumstances mean that they cannot meet those targets as they pile on the VAT, cut tax credits and education maintenance allowances and so on and so forth. This is the direction of policy that the Government are taking. Whatever those policy objectives may be, let us have somebody independently assess their impact so that people do not have to take our word for it as politicians. We want to have someone else to do it. The whole construct of this arrangement is in part about having an independent body audit the things that the Government want to be audited and assessed, but anybody else’s opinion about what should be audited or assessed, well that is outside the remit of the Bill.

Anne-Marie Morris: I question the hon. Gentleman’s argument about logic. I do not agree with his summation of the Minister’s logic, but I must question his logic. Just because we do not put a specific reference to child poverty in the Bill does not mean that the Government are not concerned it. Of course we are concerned about it. This is just the wrong place to do it and we would not do it justice.

Christopher Leslie: In a way, the hon. Lady succinctly makes the argument that the Minister took about 20 minutes to make. The Minister said that it would jeopardise the independence of the Office for Budget to have it looking at child poverty, whereas the hon. Lady has said that it is the wrong measure and not the right organisation to do that. The Minister eventually came round to saying that. If that is what they believe, that is the Minister’s judgment. She takes a different definition of responsibility than we would. We are looking at responsibility in terms of the things that matter to our constituents. If she were to talk to the people out in her or my constituency and ask them what a responsible budget is, they would want to know what the impact is on the ground on the lives, living standards and so on of real people. That is simply the point I am trying to make through this set of amendments.
On amendment 13, that barrel-scraping activity continued again when the Minister was pressed on her party’s commitment to have an audit body that is given a specific duty to report on whether the basis for the local government financial settlement is “transparent and in accordance with objective criteria set out by Ministers.”
Clearly, the Minister did not want to address that particular commitment. At no point did she say, “Yes, we stand by that commitment, but we are finding a different vehicle through which to adhere to it.” She did not say, “Actually, because of the coalition and the Liberal Democrats, things are different. What we said before the election no longer counts.” That is sometimes what the Government say when they change their mind on various things. We therefore almost had a stealthy U-turn by conspicuous logic, rather than it being stated verbally. By ignoring the issue, she simply implied that it was no longer relevant. That is a great pity. We will probably have to return to the matter at a later date in the consideration of the Bill.

Thomas Docherty: Another reason might be that the Minister has spent too long with the Lib Dems and she has forgotten what her job is.

Christopher Leslie: I cannot imagine the way that Ministers work in this day and age. It is certainly a mystery to most of the country. I thought that the notion of trying to create a vehicle to assess local budget responsibility and the impartiality of the settlement would be something we could engage with the Government on, given that they had shown through their words and policy documents an interest in that. However, obviously, that is not the case. As I say, we will have to find another opportunity to look at those particular issues.
The Minister says that a review of local government resources is coming up and that there is a Localism Bill. However, those are not the correct vehicles for assessing the transparent and objective criteria used for a local government financial settlement, because they will not be creating an independent body in statute, such as the Audit Commission or the Office for Budget Responsibility. She may well have a number of her cronies in mind that she wants to appoint to that resources review, but the Localism Bill certainly does not touch on these issues. Therefore, we await with interest to see the Government’s ability to address their promise made before the general election.
The other amendments in this chain have a number of merits. I heard what the Minister said about several of them. My hon. Friends who spoke earlier made good points about the necessity for a broader definition of sustainability. When challenged, the Minister did not say at any point, “Well, the OBR mustn’t look at child poverty or the local government settlement.” We have to hope that it will at some point regard those things as issues that matter. I hope that the fact we have debated them in Committee will send a signal to the OBR that scrutiny of such issues would be very welcome.
I am happy to withdraw amendments 8, 9, 10, and 11, but we want to press amendments 12 and 13 to a vote.

Question put, That the amendment be made.

The Committee divided: Ayes 7, Noes 8.

Question accordingly negatived.

Amendment proposed: 13, in clause4,page2,line20,at end insert
‘The Office shall also examine and report on the impartiality of the local government finance settlement as it is applied across local authorities in England.’.—(Chris Leslie.)

Question put, That the amendment be made.

Question negatived.

Question proposed,That the clause stand part of the Bill.

Christopher Leslie: Clause 4 is one of the central provisions in the Bill. We have already debated the limits of subsection (1), but the clause also sets out the consequential reporting arrangements that the Office for Budget Responsibility must make in respect of its duties. We have discussed, to a certain extent, the fact that there are several occasions on which reports must be prepared on fiscal and economic forecasting. There is, however, the anomaly of having twice-yearly reports on fiscal and economic forecasting and the fiscal mandate, but only on one occasion each year would the Office for Budget Responsibility make
“an assessment of the accuracy of fiscal and economic forecasts prepared by it”.
Does the Minister think that there is any problem with a corporate body such as the OBR assessing the accuracy of its own forecasts? In clause 4(4)(a), there is a provision that, every year, a navel-gazing operation will take place, and, presumably, a document will be published that says something in the order of, “Yes. We looked at these figures and published our assessment of them, and our assessment was good and accurate. By saying that, therefore, we comply with the provisions in the Bill.”
I do not want to give the impression that I am somehow sceptical of the necessity of every line in the Bill, but one sometimes gets a sense that it is slightly flabby legislation and that there are several provisions that are padding the legislation out to make it look slightly grander and more important than it perhaps is. Asking an organisation formally to review its own work annually seems slightly circuitous. Perhaps the Minister feels that that is an especially worthwhile exercise. It may be what, in modern management parlance, they call a 360° review. It is a horrible process for anyone in management where everyone around them is asked how well they are doing, but maybe it is something that Ministers should do more frequently. But for the OBR this is its fate—the measure is now in the Bill. However, never let it be said by a Minister in this Committee that we cannot have a measure in the Bill because it is extraneous, unnecessary or not part of the legislation. There are plenty of examples in the Bill of measures that go slightly beyond necessity.
By and large, we feel that there is merit in creating a body to provide this analysis and assessment. We also feel that the duties of the OBR and the issues that it should take into account are fairly uncontroversial, other than the unnecessarily narrow definition of “sustainability” that Ministers seem to be imposing through the drafting of the Bill. As I say, however, by and large we think that there are important provisions in the Bill and we understand where the Government are coming from on this issue.

William McCrea: I call the hon. Member for Dunfermline and West Fife.
 Alison McGovern (Wirral South) (Lab) rose—

Thomas Docherty: Ladies first.

Alison McGovern: My hon. Friend says, “Ladies first,” but I would perhaps say, “Age before beauty.”
I hope that the Minister can help me with a question about sustainability. The clause is central to the Bill as it establishes that the OBR will
“examine and report on the sustainability of the public finances.”
First, for the record, I want to raise a problem with the clause because “sustainability” is a highly contested term. Our debate on the amendments to the clause revealed the contestable nature of the idea of “sustainability” in relation to the public finances.
I will give an example to show the Committee why I think this idea of “sustainability” might be problematic and why we need to be clear about it. The financial services sector commissioned a number of academic reports prior to the 2008 financial crash that demonstrated that collaterised debt obligations and credit default swaps promoted economic stability. Some academics in various economic departments around the world found that those financial instruments were effectively promoting financial stability because of their dispersal of risk. Of course, we all know what happened.

Justine Greening: Obviously the hon. Lady is aware that the shadow Chancellor was City Minister when much of this failure of regulation took place. Does she think that he was one of the people who read those reports and was taken in by them?

Alison McGovern: The shadow Chancellor has played a great role in the economic history of this country from the mid-1990s and through the crash. I suppose that the Minister is asking me to account for why the previous Government did not take regulatory action to disallow the financial instruments that I have just mentioned. The implication of her point is that when the shadow Chancellor was City Minister, he ought to have acted in some regulatory manner to prevent those instruments from being used. Knowing what we know now, we can all go back, pick over history and say, “Perhaps such a Minister should have regulated there,” or, “Perhaps such an Opposition should not have called for light-touch regulation,” as the Conservative party did. Throughout my living memory, the Conservative party has been calling for light-touch regulation of the City of London, and it did so all the way through its time in opposition. I would happily discuss at length with the Minister the point at which she thinks the former City Minister should have regulated, and at what point she called in Parliament for that very regulation, but I fear that such a discussion might test your patience, Dr McCrea. The question is important, however, and I wish that we had more information.
The point I am driving at is that our recent history shows that conflicting evidence has been produced, with worthy academics saying that a particular instrument or a certain approach to the economy promotes stability. How will the OBR know how it is to fulfil its legal duty
“to examine and report on the sustainability of the public finances”
when that notion is so heavily contested? It will be very difficult to achieve that without reference to academics, information, economic theorists and public finance experts. I am sure that it will refer to those sources, but I would find it helpful if the Minister could explain how she interprets sustainability of the public finances and how she expects the OBR to do so. Our debates on clause 4 have actually been about the job that we expect the OBR to do. Sustainability is not a concept that can be easily understood or defined straightforwardly. Will the Minister give us more information about how she expects the duty to be fulfilled?

Thomas Docherty: First, I shall to pick up on the Minister’s earlier question about regulation. As she will recall, after Northern Rock collapsed in 2008, her own boss spoke in the City—I suspect it was at a fundraising bash, because the Tories held many of those. He said, “You want less regulation and we”—the Tories—“will deliver it.” Labour Members will not take a lecture on a light-touch regulatory approach from Conservative Members.
I agree with my hon. Friend about the wishy-washy, unclear and not very substantive approach on some of the wording in the clause. There is, of course, a Lib Dem in the Treasury team, so given the Minister’s precise mind, such a wishy-washy phrase that does not mean anything at all must have come from the pen of the Chief Secretary to the Treasury rather than her.
The specific issue that I would like the Minister to clarify is whether the OBR will have the funding and ability to carry out studies into the devolved Administrations throughout the United Kingdom. At the moment, Scottish Ministers—when they have not given away the powers—have the ability to set business rates within Scotland and to vary income tax at the basic rate by up to 3p in the pound. Those revenue-raising powers are significant, and Scotland receives a not inconsiderable block grant from the UK Government. From next Monday, the Committee of the whole House will consider the Scotland Bill, so I look forward hearing to the hon. Members for Witham and for Bury North championing the causes of further devolution and handing powers to the Scottish Parliament then. We know that they fully support those things and agree with their Prime Minister that the Scottish Parliament is a great institution. Without wishing to prejudge their excellent contributions on the issue of greater fiscal powers for Scotland, it is clear that, in future, the Scottish Parliament will have greater revenue raising powers. It has been suggested that it might even raise up to 50% of its income stream from its own people through its powers.
You, Dr McCrea, and your colleagues in Northern Ireland have successfully articulated the concerns of the people there about the current funding settlement. I am aware of particular concerns about the Treasury’s failure to guarantee the security of Northern Ireland under the ludicrously small settlement. It would be entirely appropriate for the OBR to investigate not only whether the Administrations of Northern Ireland, Scotland and Wales have the correct funding settlements to carry out their duties, but whether they have sustainable funding settlements—to use the wishy-washy term of the Chief Secretary to the Treasury.
Will the OBR be able to carry out a thorough, independent investigation into the sustainability of the devolved Administrations? If so, to echo the point made by my hon. Friend the Member for Wirral South, over what period does the Minister think that the sustainability should be examined? Is it the period of a strict 12-month settlement, over the three years of a normal funding settlement, or over the lifetime of a UK Parliament?

Justine Greening: Clause 4 sets out the main duty for the OBR, so it is obviously a key clause. That main duty is to examine and report on the sustainability of the public finances. I will respond to some of the points made the hon. Member for Wirral South shortly, but given the range of dimensions to sustainability, the OBR will be required to clarify its focus in each report and to set out how it has approached the question of sustainability.
The Bill requires four specific pieces of analysis. First, the OBR will have a duty to prepare fiscal and economic forecasts on at least two occasions for each financial year. Those are expected to act as the official forecasts for the Budget and for the autumn. Handing over the duty to produce those forecasts represents a major step forward for the credibility of the UK’s economic and fiscal forecasts and policies. That has been recognised widely, from the CBI to the International Monetary Fund. That said, it is consistent with the Treasury Committee’s report that this and future Governments retain the right to disagree with the OBR’s forecasts. If such a situation arose, the Chancellor would provide reasons to Parliament.
Secondly, alongside the forecasts, the OBR must produce an assessment of the extent to which the fiscal mandate has been, or is likely to be, achieved. It will make an independent assessment of the probability of the Government achieving their mandate, which will add further credibility to the Government’s fiscal policy. Thirdly, the OBR will, at least once for every financial year, prepare an assessment of the accuracy of the fiscal and economic forecasts it prepared previously. The purpose of that duty is to require the OBR to review its previous forecasts, which will allow it to consider any possible forecasting errors within its models and judgments, thus potentially strengthening its forecasting process.
The fourth and final specific duty is to produce, at least once for each financial year, an analysis of the sustainability of the public finances. We intend that that analysis will promote wider understanding of medium and long-term fiscal pressures, both within the Government and more widely. For each report produced under the clause, the OBR is required to explain the factors that it took into account when preparing the report, including the main assumptions and risks.
Beyond its statutory duties, the OBR will have complete discretion to determine its wider work programme. The hon. Member for Dunfermline and West Fife asked how the OBR will work with the devolved Administrations. It can work with them if there is a decision to analyse any relevant issues that are consistent with the OBR’s remit. For example, the hon. Gentleman mentioned the Scotland Bill, and once the Calman report is implemented, the OBR will be the forecasting authority for Scottish tax receipts, which I am sure he will be pleased to hear. The OBR can choose to do whatever work it wants, subject to its statutory duty, so if it decided to analyse the economy in Scotland or Wales—

Thomas Docherty: Or Northern Ireland.

Justine Greening: Indeed. We would expect the OBR to discuss such analysis with the devolved Administration concerned, but it would be free to carry it out.

Thomas Docherty: I am grateful to the Minister for that clarification. Will she also tell us whether the time over which the OBR measures sustainability will be a single year, the period of a three-year funding settlement, or the lifetime of a Parliament?

Justine Greening: As I said earlier, one reason why we did not want to accept the Opposition amendment to make the forecasts cover a five-year period is that we want to see sustainability over the medium and longer term. In fact, the OBR has said that it wants to look over a time period of 40 years, so one aspect of its work is a long-term forward look at the sustainability of public finances.
As I have said, the OBR has complete discretion. That means that although the Government, parliamentary Committees and any other body can ask it to carry out a specific piece of work, it is for the OBR alone to determine its wider work programme.
On the OBR’s ability to look at sustainability and the use of experts, and its independence, which was raised by the hon. Member for Nottingham East, there will be non-executive directors as part of the broader OBR governance structure. On a day-to-day basis, they will ensure its independence and provide a fresh input into how it is working, including on the relevance of its forecasts.
Although the Treasury previously did the forecasts that will now be carried out by the independent OBR, it also used to assess whether its forecasts were accurate and published a report on that once a year. We propose to align that assessment of accuracy with what the OBR will do, and given that both the forecasting and the assessment of that forecasting used to be done by the Treasury, we will put both in the OBR.
The review of the OBR will be strengthened on a day-to-day basis by non-executive directors and by the fact that the members of the Budget Responsibility Committee will be experts. Everybody in this House would agree that Robert Chote, as chair of the OBR and the Budget Responsibility Committee, is well respected in the area. The OBR intends to establish an advisory committee of experts to support its work. Transparent analysis and the publication of its assessment of the accuracy of its forecasting, which is part of what it plans to do, is a key feedback loop to ensure that it improves its forecasting over time.
Finally, as I have said, the non-executive directors will commission an entirely independent review of the independent OBR every five years. Those measures mean that there are clear and effective safeguards in place to ensure that the OBR’s forecasting is analysed internally year on year and also externally. The ongoing scrutiny of OBR reports not only in Parliament, but by outside commentators, will also form part of the overall process of looking at how accurately the OBR is able to forecast.

Christopher Leslie: As I understand it, only three members of the Office for Budget Responsibility are in place so far, while two non-executives have not been appointed. Why have they not been appointed and when will they be appointed?

Justine Greening: We are going through an appointment process for those non-executive directors, who of course are just the initial non-executive directors. We have said that we think that there should be at least two. We recognise that over time—Labour Members clearly have their own ideas—the Office for Budget Responsibility may feel that it needs more non-executive directors. The Bill gives the OBR the flexibility to recruit further non-executive directors. The advertisements for the positions will go out later this year. We hope that people will be in post by the end of the year. At that stage, we will have a full Office for Budget Responsibility group on the Budget Responsibility Committee and in terms of non-executive directors.
 Thomas Docherty  rose—

Justine Greening: I can see that the hon. Gentleman is keen to jump in.

Thomas Docherty: The Minister will obviously not have forgotten that there are 10 months of this year left, so could she be a little more specific about what “later this year” means?

Justine Greening: At this point, we do not intend to take too long to put in place the initial non-executive directors. I have tried to give an overall timeline that I am confident that we can meet, and I assure the hon. Gentleman that we want to get the Office for Budget Responsibility on a statutory footing, with all the people in place, as a matter of urgency. That is one reason why I rejected the amendment that would have created a delay, with a long-drawn-out public consultation that would have pushed back the whole process. We are very keen to get on with this, and I understand that we expect to have appointments in place by, in fact, the summer. However, before we can advertise, we need to agree the statutory role of the non-executive directors, in Committee and then in the remaining stages of scrutiny in the House. I can see that the hon. Gentleman wants to intervene one more time.

Thomas Docherty: I do. I want to hoist the petard very gently. When the Minister says, “summer”, does she mean by the summer recess? Will we have the chance to have a statement from the Treasury before the House rises on 19 July? The date might help the civil servants to work out whether that can be done.

Justine Greening: I cannot at this stage give the precise date by which we will have the non-executive directors in place. We clearly want people whom we think will be appropriate, and the Bill has to complete its parliamentary scrutiny, which is what we are all involved in today. At that stage, having created the roles statutorily and having advertised them, we will have to wait to see who applies. We clearly have to go through a process, but I can assure the hon. Gentleman that that process is under way and that we do not want any delay.

Christopher Leslie: I apologise to the Minister, as I know that she was finishing her speech on the clause, but I would like to know how many non-executive posts will be advertised before the summer.

Justine Greening: We will be putting in place two.

Question put and agreed to.

Clause 4 accordingly ordered to stand part of the Bill.

Clause 5

Kerry McCarthy: I beg to move amendment 15, in clause5,page3,line3,leave out ‘(2) and (3)’ and insert ‘(2) to (4)’.

William McCrea: With this it will be convenient to discuss amendment 14, in clause5,page3,line8,at end add—

Kerry McCarthy: Amendment 14 is consequential upon amendment 15, so we do not need to discuss it in any detail. The amendments reiterate some of the points that my colleagues and I made earlier and that we will address in substantially more detail when we consider how the office will be set up under schedule 1 and how it will be run on a day-to-day basis. This is about whether the relationship between the Office for Budget Responsibility and the Treasury and Government will be truly independent and about how we can ensure the greatest possible transparency in the office’s activities and accountability for what it does and how it goes about doing it. In other words, we are considering how the office can fulfil the requirement under subsection 2 that it must perform its duty under clause 4 “objectively, transparently and impartially”. I have already flagged up my concern about the relationship between the Treasury and the OBR in comments on earlier amendments that were rejected by the Minister.
The Minister has, as we would expect, said that there is nothing to worry about, that the Treasury has no problem with the OBR doing the job that it has been set up to do and that if the OBR criticises or challenges the Government, or even makes them look incompetent and foolish—perish the thought—the Minister, her boss the Chancellor and everyone in the Government from the Prime Minister down would be perfectly happy with the state of affairs and happy for the OBR to challenge, criticise and embarrass the Government in that way and would never reach a stage where they think that a spanner needs to be thrown into the OBR’s works. I am sure that the Minister will forgive those of us in the Opposition who are perhaps a little more, not cynical, but sceptical about how the Government’s undoubtedly good and honourable intentions will end up working in the cold world of realpolitik. We therefore seek to put some additional checks and balances into the Bill, and amendment 15 is one of them.
We think that it would be proper and appropriate for the office to publish details of any contact that it has with Treasury Ministers and officials. In the wider political context, there has been a lot of debate about whether Members of Parliament should publish details of all their meetings with lobby and campaign groups.

Justine Greening: Although the OBR will move into a separate building, so it will not be anywhere in the Treasury, Robert Chote and his team are still in the Treasury at the moment. To help me understand the proposal, if I were to pass Mr Chote in the corridor—he might be on his way to a meeting—and I said hello to him, and the hon. Lady wants us to publish full details of all contacts, is she saying that that contact should be published by the OBR? That would be the meaning of “all contact”.

Kerry McCarthy: Obviously, we are looking towards the time when the OBR will be based in another building. The reason why it is important that it is based in another building is distance. We are also looking at other suggestions, such as the idea that staff from the Treasury should not be seconded. The amendment would reinforce the idea of a certain formality in the relations between the OBR and the Treasury. Obviously, it could get into the realms of ridiculousness. If the Minister, as she says, met Robert Chote by the water machine, said hello and perhaps discussed what was on “EastEnders” the night before, we would not expect that to be documented and published, although I am sure that it would be fascinating to know what their conversation consisted of. We are talking about formal contact and meetings to get some idea of how much influence the Treasury seeks to exert.
As I was saying, people have floated proposals seeking to get to the bottom of the influence of lobbyists, campaign groups and commercial organisations on MPs, saying that the details of all our meetings with such groups should be published. For example, if I were to meet the Child Poverty Action Group or one of the organisations that has lobbied on child poverty, that should be a matter of public record. Other people have countered that by saying that if the requirement was that meetings on the parliamentary estate should be made public, anyone seeking to hide something would simply meet off the parliamentary estate, or they would meet over a quiet drink in an informal setting. I appreciate that it is not the easiest thing in the world to record, but it is a starting point.
The principle of a formal distance and the idea that there should be no informal or behind-the-scenes efforts to influence the OBR’s work are important. One could imagine a scenario where, if the relationship becomes tenser, people from the Treasury might make phone calls to the OBR saying, “We aren’t happy with what you are doing,” and try to bang people’s heads together. We want to avoid that situation, which is why we are suggesting that there should be a formal record of contact.

Justine Greening: The hon. Lady makes some valid points. She hit the nail on the head, when I asked her to be clear on exactly what contacts she envisaged as needing to be reported. Her amendment refers to publishing full details of all contact. It was helpful for her to clarify that it referred to formal contact and meetings. No doubt, she will welcome the fact that the OBR already publishes a log of substantive contact with Ministers, special advisers and private offices during the forecasting process. In fact, that is its decision; it can publish information relating to its contact with Ministers and officials in the way that it wants.
The amendment is in line with the Government’s objective to ensure that the OBR operates transparently. Clause 5(2) enshrines that and states:
“The Office must perform that duty…transparently”.
We agree that there needs to be some transparency on contact with Ministers, special advisers and private officers. That is what the OBR will publish. In the run-up to the Budget, when the OBR is scrutinising the impact of the Chancellor’s policy provisions, details of those meetings can be commercially sensitive if released and might harm the formulation of Department and Government policy.
Publishing all details would place the OBR under an unreasonable burden, but I can assure her that, like all public bodies, the OBR is required to operate under the Freedom of Information Act. Alongside that, it has the standard approach of looking at exemptions. When the hon. Lady’s party was in office, practice was developed on how to strike the balance between transparency for the public and the need for any Government to go through a process of discussing policy without prejudicing that process.
In November 2010, the OBR published a log of all substantive contacts with Ministers, special advisers and private office staff, during the forecasting process shortly after the economic and fiscal outlook. The issue is therefore covered in the Bill, which is why I do not support the amendment, although I welcome the spirit in which it was tabled. I assure the hon. Lady that substantive contact will be published by the OBR, although, because it is independent, it will be its decision to do so.

Kerry McCarthy: I thank the Minister for her response. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 5 ordered to stand part of the Bill.

Clause 6

Kerry McCarthy: I beg to move amendment 16, in clause6,page3,line13,at end insert—
Clause 6 deals with the issuing of guidance on how the main duty of the OBR will be performed. The main duty is set out in clause 4, while the detail of how that duty is to be performed is set out in clause 5. Clause 6 is about the guidance that then informs how that duty is carried out. Our concern is that it sets out guidance that may be included in the charter. I do not want to revisit all the territory that we have already discussed about the fact that the charter is not before us in a finalised form today; but obviously, the fact that some guidance is contained in the charter, rather than in the Bill, gives us less ability to scrutinise, amend and challenge it.
We are concerned that the issuance of guidance contained in the charter would be used as a back-door way of seeking to control or direct what the Office for Budget Responsibility does. On the one hand, the Minister stressed the impartiality of the OBR and that it will be independent, deciding how it works, what it does and how it performs its duties. That duty is set down in the legislation, and there are details in clause 5 about how it will be performed. The detail of that guidance, however, starts to sound prescriptive and as though the Treasury or the Government are keen to dot the i’s and cross the t’s in terms of what the OBR does on a day-to-day basis.
We tabled the amendment to provide a safeguard. It states that the guidance that may be issued under the charter for budget responsibility
“shall not prevent the Office from preparing any forecasts, assessment or analysis at a time of its choosing.”.
That is motivated by concern that the guidance, as suggested in subsection (1), is
“guidance to the Office about how it should perform its duty under section 4, including (in particular) guidance about the time at which it is to prepare any forecast, assessment or analysis required to be prepared under subsection (3) or (4) of that section.”.
The Minister said that the OBR is perfectly capable of making its own decisions and deciding its own work load, and that it ought to be left to make those decisions. She made that point very strongly when she said that it should not be our job to tell the office that it ought to be looking at local government finance, child poverty or whatever.
On the one hand, the Minister has said, “Leave the OBR alone; it knows what it is doing.” On the other hand, the Government now seem to want to tell the office at what time it should prepare forecasts, assessments or analysis. Surely, if the experts are in the office doing the work on a day-to-day basis, and have already been told under clause 4 that they should prepare forecasts twice a year and make an assessment of the accuracy of the forecast once a year, there is already a degree of prescription from the Government as to how often they should do things. It seems to be going slightly too far in subsection (1) to state that further guidance should be issued about the timing of
“any forecast, assessment or analysis”.
That is why we feel that there should be a caveat, or a safeguard provision, which says that if we accept that the Government are telling the office at what time it should prepare forecasts, that should not preclude the OBR exercising a degree of independence if it wants to do anything else at other times of the year. That is just a caveat to the provision. I would not have thought that the Government would have a problem including that as a safeguard, but I look forward to hearing what the Minister has to say.

Justine Greening: I hope that I can clarify the situation for the hon. Lady. Clearly, we want to ensure that the guidance helps the OBR in clarifying its duty and how it will work in practice. It is also worth pointing out that when the Chancellor comes to produce the Budget, he will rely on the OBR to produce the context for his fiscal policy decisions. The OBR’s forecasts will, therefore, be a very important part of the Budget, so it is important that that aspect of what it does is produced in a co-ordinated manner. Otherwise, we could end up with a Chancellor having to take decisions without independent analysis from the OBR. The public and Parliament could end up with no forecast alongside the Budget that the Chancellor presented to Parliament. We want to ensure that the OBR fulfils its core executive function, which is to produce the official forecast, and to do so when Parliament and the public need to see it. Part of that is the OBR’s analysis of the likelihood that the Government will meet their fiscal mandate.
There is a need for the OBR to co-ordinate with the Treasury regarding the timing of that analysis, which means that the OBR forecasts are the most relevant for the Chancellor’s policy decisions. However, that does not undermine the OBR’s ability to act independently of Ministers. How it approaches that forecast—its judgment and methodology—remains at the complete discretion of the OBR, and clause 6 makes that clear. Clause 6 is also very clear that the charter cannot include guidance on how the OBR should produce its forecasts. Apart from that, subject to fulfilling its own executive functions, the OBR can provide additional analysis to its own publication timetable, as stated in paragraph 4.21 on page 14 of the charter for budget responsibility.
Other than the example that I have just set out, the OBR can publish at a time of its choosing its assessment of the accuracy of its fiscal and economic forecasts, which it will do at least once a year. The analysis that it will make of the sustainability of public forecasts will also be done at least once a year along with any other analysis consistent with its duty to examine and report on the sustainability of the public finances.
The charter for budget responsibility sets out that relationship and the timing of the particular official forecasts that the Chancellor and Parliament need. It also sets out that the Chancellor will provide “reasonable advance notice” ahead of any forecast publication date, so there is some co-ordination; it is set out in the charter how that will work.
I hope those comments have provided some reassurance about why that piece of the guidance and the charter works in the way they do.

Kerry McCarthy: I am slightly confused as to why there is a need for the provision in subsection (1). It would seem a matter of common sense that if the Chancellor has given the OBR reasonable notice of things that are likely to appear on the political calendar, which is a sensible way to conduct the relationship between the organisations, the OBR—if it takes its role seriously, as I am sure it will—will get to work and start doing the analysis and assessments that are required. I am not sure what would be gained by additional guidance about the timing in the charter. I am not sure what sort of wording would appear in the charter that would be useful, especially as if the charter is revised, it would have to be laid before Parliament. In such a case, there would obviously be a significant time delay before anything in the guidance would become binding.

Justine Greening: The hon. Lady advances one argument that can be made. If we had not put in a safeguard to ensure that the OBR did not have to produce official forecasts to coincide with core fiscal updates to Parliament by the Chancellor and to feed into that policy-making process with its independent assessment of the impact of policies on the financial situation and the long-term sustainability of public finances, I suspect that the Opposition would quite rightly have wanted to table an amendment to say that we should have such a safeguard. When Sir Alan Budd, who was the interim chair of the OBR, was asked to provide advice on how the OBR should work, he said:
“As a minimum requirement, the permanent OBR will need to produce one Budget forecast each year to coincide with, and include all of, the Budget measures.”
The hon. Lady is right. Arguably, we could have left that provision out, but it would have been wrong. The role of the OBR is so important that we must take on board comments from people such as Sir Alan Budd. Our view was that, on that particular aspect, we should be prescriptive, not just for the Treasury and the Chancellor to have the OBR feed into the process and then report on it, but for the transparency that we need for the OBR and its role in aiding robust scrutiny of the public finances. I hope that has provided the hon. Lady with some reassurance.

Kerry McCarthy: I have nothing further to add. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Kerry McCarthy: Will the Minister elaborate on the form that the guidance on how the Office for Budget Responsibility performs its duty, particularly in relation to clause 5, will take? That clause seems to be dealing with a similar issue—how the main duty is to be performed—and clause 6 deals with guidance as to how the main duties are to be performed. Presumably, the charter and the guidance that it contains will build on the contents of clause 5.
We are particularly concerned about the role of the Office for Budget Responsibility. The Minister touched on that concern when she quoted the Treasury Committee’s report, which stated that the Office for Budget Responsibility should not be a policy-making body. It is important that it is not, but we need clarity about where the dividing line is. In its duty under clause 4(3) it will prepare “fiscal and economic forecasts” and assess
“the extent to which the fiscal mandate has been, or is likely to be, achieved.”
In particular, the wording “is likely to be achieved” strays into the territory of expressing an opinion. That opinion might be based on data and facts rather than political ideology, but it would certainly lead the office into that sort of territory. If it produces critiques of what the Government have done, a question arises as to whether it will stray into political territory.
Will the Minister tell us whether the guidance will deal with the question of what would be considered as having regard to Government policies, as set out in clause 5, and as not considering
“what the effect of any alternative policies would be.”?
Imagine that the Government proposed a rise in income tax of 1p in the pound. The Office for Budget Responsibility would play a role in considering the impact that that would have on the sustainability of the public finances. In considering that, would the office be able to pass judgment on or assess the impact of a 2p rise in income tax, or of the impact of no rise? If one is looking at the impact of a rise in income tax in the context of the sustainability of the public finances, it would seem eminently sensible to consider the consequences of different levels of income tax rise. If the rise in income tax were to be offset by cutting VAT, various scenarios and combinations of rises in direct taxation and cuts in indirect taxation might be considered, or one might look at the alternative, namely whether there should be rises in indirect taxation and cuts in direct taxation.
Given the vagueness of clause 5 on that issue, perhaps the guidance that will be included in the charter under clause 6 should give more guidance to the Office for Budget Responsibility on when it would be deemed to be straying out of its territory and when it would be deemed to be fulfilling its duty. Perhaps the Minister can give us some reassurance on that point.

Thomas Docherty: I want to focus particularly on subsection (4), on which we seek guidance as to the Minister’s thinking. I will provide some specific examples of concern that I hope she can help to deal with. We are concerned about the designation of 28 days, which on the face of it appears to be a perfectly reasonable period of time; I do not object to the principle of four weeks’ notice. However, the Minister will be aware that a series of events over the next 12 months will eat up quite a lot of the House’s sitting time, and that Ministers may not always be available. I am not sure whether the Minister is one of the 200 MPs who has had an invitation to the royal wedding. I certainly have not, and I am not sure whether any other Opposition Members have. The hon. Member for Bristol West shakes his head.
I was told yesterday that 200 MPs have received invitations. I do not know whether any of the royal household’s Chamberlains or Comptrollers and Vice-Chamberlains have been invited in one capacity or another, but obviously Ministers may be distracted in the build-up to the wedding. The House will not be sitting. I understand that some hon. Members have their own wedding plans. They are to be congratulated on that, but I do not know whether they will need similar preparations.
There will be a series of events. The Easter recess lasts for three or four weeks, and I am sure that Members will be out and about in Bristol, Chippenham and elsewhere, campaigning hard for their coalition colleagues. If the idea of having 28 days is to allow Ministers and Members pre-consultation with interested bodies, it is reasonable to suggest that the Government may struggle to have genuine consultation.
Then there is the summer recess. I do not know what plans the Minister has for a holiday, and whether she will be joining the Chancellor in Klosters or wherever they go. I am not sure what are the best ski resorts in the height of summer. Perhaps the Minister will clarify the Chancellor’s thinking on that. Ministers and Members may not be around to take meetings, and the Christmas and new year recess will eat up another two weeks or more.
I am genuinely concerned about the 28-day period. We have not tabled a specific amendment, because we hoped that the Minister would clarify the matter. However, she will appreciate that if we do not feel that we have received a robust response we reserve the right to table an amendment, perhaps on Report. I hope that the Minister will give us clarity on that question.
I am a new Member and seek guidance from the Minister as to the procedure for laying the charter before Parliament under clause 1(6). Will she clarify what the period for formal debate and consultation will be? I cannot speculate on what the Chair of the Treasury Committee may wish to do, but if he felt that it would be useful to take evidence, would that be built in? What guarantees are there on the period of formal statutory consultation? Does the Minister envisage it being done through a statutory instrument, or in an order to be debated by the House?
I would be grateful if the Minister would clarify both those issues: the 28 days, and the process for formal parliamentary scrutiny and debate of changes to the charter.

Justine Greening: The charter for budget responsibility may include guidance to the Office for Budget Responsibility on how it should perform its duty, and the OBR is required to act consistently with it. However, the guidance must relate only to the functions conferred by the Bill. I must make it clear that the guidance cannot add to or distort the OBR’s remit as set out under the Bill, which is a safeguard.
As we heard earlier this afternoon, the charter can include guidance on the timing of the forecast assessment and analysis required under subsections (3) and (4) of clause 4. The Chancellor will commission the OBR to produce its fiscal and economic forecasts on a particular date, to ensure that the forecasts are produced in line with the Government’s timetable for the Budget and autumn forecast; that requires considerable co-ordination across Departments. Other work will be produced by the OBR, at times determined solely by the OBR, with release dates set out in advance to ensure transparency.
Equally, the charter must not provide guidance on the methods that the OBR may use in producing its forecasts, assessments and analysis. That provision is vital, because it ensures that the OBR has complete discretion over the methods that it uses, and that the Budget Responsibility Committee has complete freedom to determine how best to produce its independent forecasts, assessments and analysis.
Finally, if the Treasury wished to modify the guidance to the OBR in the charter, a draft of the modified guidance would need to be published at least 28 days before the modified charter is laid before the House for consideration. That addresses one of the questions raised by the hon. Member for Dunfermline and West Fife. That 28-day timeline is consistent with the 28-day procedure for statutory instruments, and, as I just stressed, it is a minimum amount of time. There would be the potential to lay an instrument earlier if, as he pointed out, there were mitigating circumstances. Taking all those things together in the clause means that there should always be time for appropriate parliamentary scrutiny of the charter.
The hon. Member for Bristol East had concerns about how the OBR will undertake its assessment of whether the Government are meeting their fiscal mandate, and how it will judge sustainability. It is for the OBR to undertake such analysis, and it will assess the likelihood of the Government’s meeting the fiscal mandate that they set out for themselves in the charter. Alongside that, part of the Bill and the guidance in the charter sets out that the OBR has to be very transparent about how it approached that analysis, the risks that it took into account, and its assumptions and methodology. Its assessment will set out whether the Government are on track to meet their fiscal mandate—the fiscal objectives that they set themselves—and there will be transparency so that people can look at how the assessment was carried out and take a decision on whether it could be improved, and its shortcomings. It is clearly more challenging for any forecasting organisation to do its job in times of uncertainty than in times of incremental economic change.

Thomas Docherty: I am conscious that the Minister is trying to wind up the debate. Could she clarify the formal parliamentary process once the modified charter is laid before Parliament? Would it be a statutory instrument, or some other mechanism?

Justine Greening: We expect it to be handled like a statutory instrument in terms of timing and scrutiny, but, ultimately, there will be a parliamentary procedure that the usual channels will go through to decide precisely how it will be handled.
Going back to my comments on whether the OBR should look at different policies—this was raised by the hon. Member for Bristol East—we do not think that it should be in the business of looking at alternative policy scenarios. It should simply provide forecasts that are based on the policies that the Government are pursuing and have announced in the Budget. If it starts to stray into analysis of alternative policy scenarios, it inevitably risks undermining its independence, impartiality and objectivity.

Kerry McCarthy: I appreciate entirely what the Minister is saying, which is why I raised the issue. It would be wrong if the OBR were to see its job as passing a verdict on anything that might be kicking around in the political sphere as a possible move that the Government could take. However, there is a difference between that and using comparisons with other possible scenarios to pass judgment on what the Government are actually doing.
That is why I used the example of the Government looking at a 1p rise in income tax; it would be difficult to assess the impact of that on the sustainability of public finances without the charts that are normally produced in such circumstances and which have always been produced by Robert Chote in his former role at the IFS, looking at how much would be raised by a 2p rise and how much by a 3p rise. I want some assurance that the OBR’s remit could enable it to cast its net slightly broader than just looking at exactly what the Government have done and to make comparisons with other things that the Government might have considered when they made their decision.

Justine Greening: To be clear, the Office for Budget Responsibility will not do that. It will not look at alternative policy scenarios, because its role is to provide an independent forecast of the economic and fiscal policy decisions of the Government, with the economic forecasts going out into time.
The hon. Lady gave the example of the OBR forecasting alternative scenarios for income tax. If it did that, it would inevitably lead to a debate about whether a Government could go further and still have sustainable public finances in relation to income tax decisions. That would take the OBR into a sphere where it could be embroiled in a political debate about income tax policy, which is absolutely not what we want for the OBR. We want it to look at the policy decisions of the Government, to model them, to give its assessment on forecasting for the economy and public finances; and, alongside that, to say whether it believes the Government are likely to meet the fiscal mandate and objective they set themselves in the light of the policy decisions taken and the expected trajectory of the forecasts.
The hon. Lady suggests an alternative way for the OBR to work but, if we went down that route, it would undermine the most important aspect of the OBR, which is to have something that is independent and that achieves that through being impartial, objective and transparent.

Thomas Docherty: The Minister is very generous in taking our genuine interventions. Let us go back to Treasury questions just before Christmas, when, as she will recall, no fewer than five Conservative MPs independently asked what assessment she and her colleagues had made of the graduate tax. Mr Speaker let those questions in because he said that obviously the Government must have considered the graduate tax and discounted it when they were deciding on the hike in tuition fees that the hon. Member for Chippenham tore up his pledge card and supported.

Kerry McCarthy: And the hon. Member for Bristol West.

Thomas Docherty: I think that the hon. Gentleman abstained. He kind of stuck to his principles and abstained. Surely if the Government have made an assessment of something and discounted it, it is reasonable that the OBR would take a look at that policy area? I understand what the Minister said about going off at a tangent and doing some blue-sky or original thinking, but if it is a policy, whether a graduate tax or an income tax rise, that the Government have admitted they have considered but discounted, does she not think the OBR should be able to look at that?

Justine Greening: The hon. Gentleman makes an important point. The OBR plays a role of robustly and independently looking at the impact of policy decisions as they might affect the public finances and their sustainability and the long-term forecasting of economic indicators.
Of course, the OBR like any other public body will be subject to the Freedom of Information Act. Although clearly each case is different, the situation that he raises would be likely to fall under an exemption of policy in development. In other words, it would simply be impossible to publish a blow-by-blow analysis of how the Budget was being pulled together. It would not be in anybody’s interests for all that to be put into the public domain. However, the OBR is, of course, subject to the Freedom of Information Act, like any other public body.

Thomas Docherty: I think that perhaps the Minister has misunderstood me. If that is the case, I apologise deeply. The example that I was trying to give is of the Government having considered a taxation policy and discounted it. Does she not think that if the Government have discounted a policy, it is right for the OBR, when it measures the validity of the policy that the Government have adopted, to compare the two like for like? Is that clear?

Justine Greening: We come back to my original comments. First, apart from performing core executive functions of fiscal and economic forecasting, it is up to the OBR to decide what other forecasting to do and how and when to publish it. My response is much the same as it was to the hon. Member for Bristol East: I think that it would be against the spirit of what we are trying to achieve in setting up the OBR to put alternative policy scenarios into a post-Budget analysis, because it would inevitably end in the OBR being pulled into a debate about what the right policy was. We do not think that that is the OBR’s role. It is right for Parliament to debate different policies, as we did on tuition fees, but that is the role for us as Members of Parliament elected by our constituents.
It is important that the OBR not only is independent but is seen to be independent. We need only witness how the Opposition reacted to what they felt was the inappropriate timing of a publication. I reassure Members that there was no Government involvement, but it shows how important and sensitive the issue is. That is one reason for the set-up of the clauses in the Bill and the charter supporting it, and it is why it is so important not just for the OBR to be independent but for it to be seen to be independent. We can already see that it will always be a concern, so we must put it beyond doubt. That is what we are trying to do by saying that we do not think that the OBR should analyse alternative policy scenarios. With that, I support the clause.

Question put and agreed to.

Clause 6 accordingly ordered to stand part of the Bill.

Clause 7

Question proposed, That the clause stand part of the Bill.

Christopher Leslie: Given the general scepticism that some hon. Members will have spotted in my previous comments, I do not wish to be a cynic about the Bill, but it is sometimes difficult to avoid when I look at how the clauses are set out. If Members turn to page 3, they will see that clause 7, “Efficiency etc.”, contains a single sentence:
“The Office must aim to carry out its functions efficiently and cost-effectively.”
That is clearly a crucial instruction for the Office for Budget Responsibility. Of all public bodies, quangos and agencies, clearly it needs to be told on the face of the Bill that it should conduct its functions efficiently and cost-effectively.
Why is the clause needed? Will the Minister elaborate on whether it is a necessary piece of primary legislation? Can she explain how such provisions would be enforced? In particular, I presume that the OBR will be subject to audit. I think that the budget for its running costs is open to scrutiny by the National Audit Office, but I may be wrong so will she confirm whether that is right? How will we measure efficiency and cost-effectiveness in this context? This is a new body that will be under intense scrutiny, and if it is anything less than frugal, or if it is extravagant in any way with its office equipment, furniture, real estate costs and so on, I am sure that members of the public, the fourth estate and others will take an interest.

Duncan Hames: I am sure that they would, but I am not sure whether that would be sufficient. I am sure that the hon. Gentleman is, like me, a great supporter of the establishment of the Independent Parliamentary Standards Authority, or IPSA, yet I suspect that, in hindsight, we would have considered a clause such as this to be beneficial to the Bill that established it.

Christopher Leslie: Mentioning that four-letter acronym is a bit like mentioning the Scottish play. I could not agree more. Indeed, I fear mentioning the authority’s very existence on the record, so I will steer clear of it, not least because it probably would not be in order.
Will the Minister give us an estimate of the budget that will be available to the OBR? It would be useful to know what it will cost the taxpayer. On the concept and notion of the words “efficiently” and “cost-effectively”, the Bill is laden with a number of ill-defined adverbs—in fact, I sometimes wonder whether we should have an office for adverb definition. The Treasury might consider establishing that unit at some point. Such adverbs litter the legislation, yet there is no firm interpretation clause to define them. I hope that the Minister can tell us why the OBR is necessary, how it will be enforced, measured and audited, and how much it will cost.

Thomas Docherty: Sometimes I wonder whether Liberal Democrats have much say in the Treasury and on economic policy. We often see the Parliamentary Private Secretary to the Chief Secretary sitting on the Liberal Democrat Benches rather than behind his boss; he is never confident enough to be there for Treasury questions or statements. However, when I see a statement such as that in clause 7, which means absolutely nothing to anybody and is complete waffle, I have confidence that Liberal Democrats have a real role in drawing up legislation. It is almost embarrassing for the House to have such a phrase in a Bill.
I should declare that one of my wife’s relatives is a constituent of the hon. Member for Bury North, and she tells me that he is a real champion in Bury of less regulation, of cutting back needless bureaucracy and of less Government waste on the printing of meaningless documents. If there was ever a statement in a document that was utter nonsense and tripe, it is that in clause 7. It is such waffle that it states not that it “will” carry out its functions efficiently and cost-effectively, but that it will “aim” to do so.

Alec Shelbrooke: We are all enjoying this part of the debate. We have been here for two and a half hours, and things have livened up at this late stage. To return to a point made earlier in relation to the Audit Commission, it must be recognised that there was a huge amount of waste in the commission. That is what the sentence under discussion relates to. It is worth mentioning that the way in which some bodies progress over time creates large amounts of waste.

Thomas Docherty: I am grateful to the hon. Gentleman, because that leads me to a point that I will make in a moment. I shall first finish expanding on this point. The provision is a waste of paper and ink, and a prime example of rhetoric in Opposition not being shown in practice. This is the kind of nonsense civil service-speak that we have come to expect from the Treasury over far too long a period. It should not be there.
The hon. Gentleman rightly raises the issue of how to measure waste. Although I would not fully agree with his description that the Audit Commission had incurred too high a level of waste, I do agree in respect of some of the things that the Audit Commission and others have done. Apart from the fact that it says it will “aim” rather than “will”, the clause does not give a single measure or performance indicator or any standard by which to judge whether the OBR will be carrying out its functions.

Justine Greening: The hon. Gentleman just said that the clause should not be there. Can I take it from that that he is going to push it to a Division and vote against it?

Thomas Docherty: I am hoping that when the Minister responds she will be able to articulate, as successfully as she has all day, exactly why the clause has been written. I am sure that she gave that more than 30 seconds’ thought when she read over the Bill and when it was being drawn up. I am confident, given her skills over the past nine months, that she will more than best me in my arguments. Up to that point, I would like to spout a bit more.
The hon. Member for Elmet and Rothwell was entirely right to say that we should not have waste in Government. The clause fails to give a single measure by which it will judge the success or otherwise of the OBR. I am with the hon. Member for Bury North that we should have better government and no meaningless regulation.

Alison McGovern: Does my hon. Friend agree that this is an important debate, given that we have just seen the so-called cull of the quangos? There is a real possibility that that will end up costing the country more than when we had those organisations operating. We all want to get the OBR right. How does he feel the context of the clause needs to be understood in terms of the cost-effectiveness that we are trying to instil in the Bill?

Thomas Docherty: My hon. Friend is entirely right. On the cull of the quangos, it is interesting that the Secretary of State for Communities and Local Government eventually had to bow to some pressure.
When the Minister is Chancellor—a position I am sure she will have before too long—or when, in four years and three months, there is a Labour Government, or any future Government, they may dislike the OBR and may, for quite logical, political reasons, decide to scrap or change substantially its responsibilities.
I gently suggest to the hon. Member for Elmet and Rothwell that the Secretary of State for Communities and Local Government has hidden—as far as the right hon. Gentleman can hide—his hatred of any sort of quango behind a smokescreen of efficiency and he claims that the Audit Commission is not efficient. If one does not spell out how to measure the efficiency of the OBR, it is vulnerable in future to a politically motivated Government saying that they want to get rid of it because they do not like the reports that it produces. The Minister has clearly given this sentence a great deal of thought, and I look forward to her explaining what she means by it.

Justine Greening: I have to say that I did not think that clause 7 would be controversial. Perhaps comments have proved that wrong. I think we are right to have clause 7 in place because it requires the OBR to
“aim to carry out its functions efficiently and cost-effectively.”

Thomas Docherty: Will the Minister give way?

Justine Greening: Perhaps I can get to the end of my first sentence, the hon. Gentleman will find it helpful. To continue: and cost-effectiveness and efficiency should be an important consideration for every public body. I know he thought that was all waffle, but I assure him that, to us accountants, those words are important and mean an awful lot. I will say a little about the OBR’s budget and how we will ensure that it operates cost-efficiently and effectively.
The Office for Budget Responsibility must have the maximum credibility in its operations. If the hon. Gentleman looks at clause 21, he will see the same provision in relation to the National Audit Office. Hon. Members will be relieved to hear that ensuring that organisations run in an efficient, cost-effective way is a standard provision.

Kerry McCarthy: The Minister pre-empts me—I was flicking through the Bill to ensure that a similar clause was in the second section of the Bill about the National Audit Office. Is that something we will find in every Bill that sets up a new Government-related body?

Justine Greening: The reason it is important in this Bill is that clause 5, which we have just debated, sets out that the OBR has complete discretion over how it fulfils its duty; in many respects, clause 7 is the quid pro quo to that. The OBR has some independence and can decide how to set about fulfilling its duties, but that must be done in the context of working efficiently and cost-effectively.
The hon. Member for Nottingham East was right. The National Audit Office will be able to look at how the Office for Budget Responsibility is working. The Treasury Committee stated that
“the OBR should be subject to the same sort of NAO scrutiny as any other part of Government.”
We agree with that and think it is important enough for it to be in the Bill.
The budget for the Office for Budget Responsibility is now set as part of the spending review. We have set a budget for the whole of the spending review period, so it will not be something that we come back to over the course of that period. Part of that is about ensuring that the OBR knows it is independent. The risk outlined by the hon. Members for Nottingham East and for Dunfermline and West Fife, that the OBR could be penalised for producing awkward reports and have its budget cut, has been tackled by giving the OBR a spending review settlement for the whole period. That settlement provides an annual budget of £1.75 million and Robert Chote, the chair of the OBR, agrees that such a deal provides the OBR with adequate resources. We are confident that the clause provides for the OBR to act in a way that is cost-effective and efficient. Furthermore, alongside the spending review settlement it will have the budget over the course of this Parliament to get on with the work that it needs to do.

Thomas Docherty: I am slightly concerned. If I have heard correctly, the Minister is suggesting that future Bills that set up a new body, from the Department of Health for example, will not contain that magical, wonderful sentence. Is she saying that the OBR and the NAO need to behave in a cost-efficient manner and therefore that has been written down, but if other Departments do not do that, the impression is that the Treasury does not care much if the Department of Health does not run its bodies in a cost-efficient manner? Surely we should either have that sentence as a matter of course in every Bill concerning public bodies, or not at all.

Justine Greening: Well, as the hon. Gentleman pointed out, we are in the business of getting rid of as many ineffective public bodies as we can—he talked about what he called the quango cull. We are, of course, talking about a new body that has an important role to play. In the context of this new body—we do not aim to set one up every day of the week, which arguably is a change from the previous Government—we have inserted this clause because, as he recognises, perhaps never more than now, it is incredibly important to ensure that the Government is run in a cost-efficient and cost-effective way. As I said, the other reason the provision is in the Bill is because a core aspect of how the OBR needs to work is its independence. The provision is the quid pro quo for the OBR having the level of discretion it has—in other words, complete discretion.

David Nuttall: I am sure that all hon. Members agree that every body should be efficient and cost-effective—there is no doubt about that—but would the clause not be even more effective and useful if it simply omitted the words “aim to”, so that it stated that the office “must” carry out its functions efficiently and cost-effectively? I worry that the wording might give the body a bit of wriggle room because it will be able to say, “Well, we aren’t very efficient, but we aim to be.” That is my worry. I am happy with the wording in this Bill, but in future perhaps the Minister could say, “Look, knock those words out. We’re telling you that you’ve got to be efficient, not just aim to be efficient.”

Justine Greening: My hon. Friend makes a powerful point. I can assure him that the form of words we have used in no way lets organisations off the hook. In fact, there is a legal reasonability test in the way it is phrased. We are passing a Bill that will become law, and the clause will ensure that the measure can work. However, he is absolutely right that we have to demand value for money. He will be pleased to hear that one of the things we are doing in the Treasury is not just looking at the Government’s policies in terms of value for money, but making sure that we have better tools in place to gather core financial data that will help us do that over the coming years.

Thomas Docherty: I saw the civil servants scribbling like mad as they tried to dig themselves out of a hole. I know that the Liberals are very fond of legal advice being published, but if the argument from the civil servants is that the words cannot be taken out—as the hon. Member for Bury North has reasonably suggested—will the Minister publish for the Committee’s benefit the specific legal advice that says if the words “aim to” are taken out, the Bill would somehow be illegal?

Justine Greening: I do not think it is fair to say that we have had specific legal advice per se. As I pointed out earlier, we are talking about a standard provision, which has gone not just into this part of the Bill, but other parts. This is not a case of smoke and mirrors, as the hon. Gentleman seems to be suggesting. If he is interested in the concept of reasonableness in the context of the law courts, I advise him that I am absolutely certain that the House of Commons Library has entire books both on how over the years the concept of reasonableness has become enshrined within the framework of our legal system, and on the value of giving some flexibility to enable a judgment to be made on what is reasonable, based on the merits of a case. I am absolutely sure that if he leaves the Committee Room and heads down to the Library, he will be able to read all about reasonableness and get a better understanding of the background to how the clause is phrased.

Question put and agreed to.

Clause 7 accordingly ordered to stand part of the Bill.

Clause 8

Question proposed,That the clause stand part of the Bill.

Christopher Leslie: Yet again, we step into a further dimension of poor drafting of the Bill. I can see why we would want the Office for Budget Responsibility to publish the reports, lay them before Parliament and send copies to the Treasury, but I am not convinced that a separate clause in the Bill is necessary to make that happen. I feel as though we should have a fourth point: it should be published in hard copy, perhaps on A4 paper, and published in English; perhaps they should use an envelope and the appropriate postage to send it to the Treasury; and perhaps it could be posted in a timely fashion. There is a point at which describing such process-ology in the Bill gives me cause to suspect that at some point the Chancellor was told, “Maybe this is a one or two-clause Bill with a schedule to create the OBR”, and he hit his fist on the table and insisted, “No”. As a matter of the virility of the Treasury, he needed at least 10 clauses to get into double figures.

Justine Greening: I have to pick the hon. Gentleman up on his point about the Chancellor hitting his fist on the table. I think he is getting him mixed up with his predecessor.

Christopher Leslie: I am sure that my right hon. Friend the Member for Edinburgh South West (Mr Darling) would not have hit his fist on the table in such a way. I am surprised that the hon. Lady would characterise the Chancellor’s predecessor in that way. I am not sure who she is thinking about.
Perhaps one of the more pertinent points of the clause—if there is a pertinent point—relates to laying the reports before Parliament. It is necessary to establish beyond doubt the independence of the OBR. We could ensure that all parties have receipt of these reports, have notice of them, an opportunity to read them simultaneously and that the Treasury does not receive a report ahead of Opposition parties. Clearly, there are many occasions when royal commissions and other inquiries will give their findings to Ministers many days in advance so that they can cogitate and assess their contents. They usually give Opposition parties an hour or half an hour’s notice before publishing a matter before Parliament. Will the Minister at least assure us that Ministers will receive OBR reports at the same time as Opposition parties? That will mean beyond any shadow of a doubt that it is a non-party, non-biased Office for Budget Responsibility.

Thomas Docherty: I shall be relatively brief, because my hon. Friend has made many of the pertinent points that I wished to make. I was never a great student when I was at school. I suffered from bad habits. When I had better things to do, such as playing football or computer games in the evening, I would leave my homework to the last minute. When I was in the playground before my homework was due, I went through the exercise of trying to stuff out as far as possible my 500-word essay. I must confess that I think the Chancellor—having gone to Klosters on his break, or perhaps he was on a yacht with Lord Mandelson and Mr Rothschild—did not give the Bill much thought. He sat at the back of the Cabinet room, and just before he was due to hand it in to the civil servants, he came up with two or three clauses to try to pad out what is a fairly sparse document. As the hon. Member for Bury North so ably articulated, less is sometimes better. In this case, it would have been better.
I am slightly surprised by the order in which the distribution of reports is listed. If there had to be an order, I would have suggested “lay before Parliament" first. There is a good debate to be had about whether it should be the Treasury next or the public, but the key thing is that the provision to “lay it before Parliament” should have been first. Further to the point made by my hon. Friend the Member for Nottingham East, could the Minister explain why Parliament was not given sovereignty in terms of the order in which the OBR should present its reports? Is it purely grammatical and stylistic to make it flow downwards and look better or was there some reasoning behind it?

Justine Greening: I do not think I follow the hon. Gentleman’s argument. Clearly the first thing the office has to do under clause 8(2) is to publish the report. It is hard to lay something before Parliament that has not yet been published. Hopefully the hon. Gentleman welcomes the fact that after that it would be laid before Parliament.

Stephen Williams: Will the Minister give way?

Thomas Docherty: It is my speech and I will give way in a moment. I am baffled. I sat in this room less than a month ago when we debated the military covenant report, which obviously was about a report being published. It did not have a subsection (a) which stated that the report must be published. Surely it is a given. It is an example of bad drafting and civil servants doing their homework at lunchtime just before the afternoon lesson. It is a badly drafted document. It is not necessary to write “publish the report” if that was the intention.

Stephen Williams: I am sorry about my mistake, Dr McCrea. The hon. Gentleman bobbed up and down so often that I had forgotten whether he was making an intervention or a speech. He is making a good point. Would he be reassured if the intention behind this was that the document would be published but would be laid before Parliament before being disclosed to anyone else, such as the press, which the last Government did frequently?

Thomas Docherty: I welcome the hon. Gentleman to the debate. He is entirely right. I am seeking to protect the sovereignty of Parliament by ensuring that copies are not doled out to the Press Gallery but are laid in the House of Commons prior to being released anywhere else. Bizarrely, given the structure of the clause, making it available publicly does not seem to have made it into the list of actions that the Government make. If we are to have this totally spurious clause, I hope that the Minister can give me a guarantee that the reports will be made more publicly available. I agree with my hon. Friend the Member for Nottingham East that we should not get into whether it is on the internet, in hard copies and available from HMSO or wherever else. Will the Minister give an undertaking that there will be a publicly available version of the reports?

Justine Greening: Hon. Members will know that this clause ensures that the OBR publishes each of the reports required under clause 4 and publication will allow every interested party to access the forecasts, analyses and assessments of the OBR. That is the key element of the OBR’s transparency. As we have just heard, it is clearly set out in clause 8 that the OBR must lay its report before Parliament, not the Treasury. In fact the Treasury will be sent a copy of the report. That is a further example of how we have tried to strike the right balance by making sure that although the OBR produces official forecasts that the Treasury uses, it is nevertheless independent of the Treasury and that is why a copy of those reports will be sent to the Treasury.
On the point about timing, for the autumn forecast, the OBR shared its final report with the Treasury in line with how the Office for National Statistics would generally operate in terms of pre-release access. So the Treasury got 24 hours’ notice but that is no different from the way public statistics are often put into the public domain. It is entirely consistent with that overall approach, which I hope will provide some reassurance that there is no special arrangement for this report over other reports that people like the ONS would release.

Christopher Leslie: I understand the relationship in terms of market sensitivity for statistical releases and so on, and the need for policy makers to be able to have some advance notice, but that argument does not apply to the Office for Budget Responsibility, whose whole core and being is its independence. Can the Minister see that from the Opposition perspective, which she will probably have in the full career ahead of her, it might be good practice when Parliament receives such documents for Opposition parties, and even Liberal Democrat spokesmen when relevant, to receive them simultaneously with Ministers. There is no justification for not doing that, is there?

Justine Greening: I do not think there is any reason to depart from the normal way in which public statistics are released. The hon. Gentleman was a Minister during the halcyon years when the economy was bubbling away and building up the structural deficit that we are having to sort out. There is no reason, having set up the OBR, to depart from a standard reporting procedure of the ONS. As ever, Government policy must react to OBR forecasts, so our approach is only right.

Thomas Docherty: I draw the Minister’s attention to the rather sheepish-looking hon. Member for Bristol West who, only four or five minutes ago, was under the clear impression that Parliament would receive the information before the Treasury. Even the Minister’s loyal supporters believe that her position is not the right one. Will she not reflect on the fact that the OBR is very different from the ONS. There are no market statistics, and this is another example of her civil servants not having done their homework before turning up here today. Will she reflect carefully on this important issue of parliamentary sovereignty?

Julian Smith: Will the hon. Gentleman give way?

Thomas Docherty: I cannot give way to the hon. Gentleman.

Alec Shelbrooke: On a point of order, Dr McCrea. Will you advise whether it is in order for civil servants to be constantly criticised when they have no right of reply.

William McCrea: I think we will just continue the debate. I remember sitting in other debates when hon. Members were in different seats, and civil servants, although they had no right of reply, had to listen to comments being made about them.

Justine Greening: I can be clear. This is a Bill that, having been through the other place, Ministers are now taking through the House of Commons. I think the comments about officials are slightly superfluous in that context.
I simply do not agree with the points made by Opposition Members. There is a long-standing process for releasing a range of sensitive and public material into the public domain. In many respects it has served this country well in enabling Governments to give a response when statistics come into the public domain, and I think that is why the Office for National Statistics has approached its role in that way. That is why we believe that it is sensible for the OBR also to approach its new role in that way. I appreciate that some hon. Members may not agree, but we must agree to disagree.

Question put and agreed to.

Clause 8 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Mr Goodwill.)

Adjourned till Thursday 3 March at Nine o’clock.